SHAFAQNA – Armenia’s economic burden is getting heavier by the day. The country is now grappling with a grand economic crisis that has vastly deteriorated in recent years.
Recession in Russia has accelerating Armenia’s worsening economic situation since the country heavily relies on money transfers from its “big brother.” The strongest impact carried by the Russian recessions has been seen in the sharp decline of money transfers sent by labor migrants.
Remittances sent from overseas play a crucial role in Armenia’s economy, sharing a significant bulk in the GDP – nearly 16-17 percent.
The volume of private transfers received from Russia dropped by more than half in the beginning of the current year compared to the same period last year, Armenian media reported.
“In April this year, the volume of private transfers to Armenia transferred through the banking system from abroad amounted to $69.1 million. In April last year, the figure stood at $102.9 million. This shows a 32.8 percent reduction in volume,” Armenia’s “Haykakan Zhamanak” wrote.
The report blames Russia for this “rapid fall” as most transfers, about 85 percent, usually comes from Russia.
The newspaper said the volume of transfers received in April this year from Russia, decreased by $36.7 million and amounted to $54.4 million. For the first four months of this year, according to published official figures by the Central Bank, the net inflow of private remittances amounted to $198 million instead of $352.5 million during the same period last year.
Thus, during this period the amount of private transfers from Russia declined by more than half: from $310 million falling to $148.7 million.
This factor has consequently significantly affected revenues received from tax.
As a result of Armenia’s weak and incompetent economic policy, revenues to the budget have fallen. If the country continues this trend, the state will soon run out of money.
The month of April was marked by another nuisance for Armenia’s economy. Tax revenues for this month declined by almost 3.5 billion drams ($73,3 million) or by 3.7 percent.
The value-added tax (VAT), the most important source of income for the state treasury, led to such a dramatic decline.
In annual terms, the amount of paid VAT fell for the first time in March to 3.6 billion drams ($75,4 million). Prior to that, the dynamics of this tax was positive.
The decline in VAT contributed to a relative slowdown of tax revenues – by 4.0 percent. Tax collection
has mirror effect on the state of Armenian economy, which is largely dependent on foreign trade with Russia, and the inflow of transfers from this country.
The production of those goods, which are mainly exported to Russia, also decreased, leading to a further fall of trade with this country.
Forecasts for the Armenian economy are far from heartwarming for the next few years. As Armenia’s economy largely relies on Russia’s economy, the improvement of its economic situation significantly depends on Russia coming out of recession.
Armenia’s financial crisis and its hardship really started in late 2014, proving once again that the fragile Armenian economy depends strongly on regional developments – as reflected by falling foreign investments, remittances and domestic trade, the main engines driving its economic growth.